Introduction—When Corruption Is the Operating System: The Case of Honduras

Honduran dynamics illustrate core features of the way politics are taking shape worldwide in the twenty-first century, how reputedly open or even apparently chaotic economies are in reality structured, and how those dynamics help propel climate change, persistent inequality, and spiraling conflict.

On March 3, 2016, news came of one more violent crime. A woman, Berta Cáceres, had been shot in the predawn in her home in southern Honduras. It was one of those stories that abruptly fuses attention to an unfamiliar, seemingly random place: a country with an unpronounceable capital, a segment of the slender serpentine that separates the Caribbean Sea from the Pacific, a country known for forests and cigars and the northward flight of tens of thousands of children, and, yes, for murder. But Cáceres was no ordinary woman, and her assassination had an import all its own: it somehow encapsulated the nature of the corruption that Honduras shares with at least sixty-five countries worldwide2—and the nature of some of the civic movements that are most successfully fighting it.

Honduras may seem a relatively insignificant country, of interest largely to Latin Americanists who came of age in the waning years of the Cold War. But the ways in which power is exercised there, and to what ends, are no local idiosyncrasy. Honduran dynamics illustrate core features of the way politics are taking shape worldwide in the twenty-first century, how reputedly open or even apparently chaotic economies are in reality structured, and how those dynamics help propel climate change, persistent inequality, and spiraling conflict.

It is no longer possible to think of corruption as just the iniquitous doings of individuals, be they street-level bribe payers, government officials, or business executives. In the five dozen or so countries of which Honduras is emblematic, corruption is the operating system of sophisticated networks that link together public and private sectors and out-and-out criminals—including killers—and whose main objective is maximizing returns for network members.3 Corruption is built into the functioning of such countries’ institutions. And, like the criminal organizations that are threaded through their fabrics, the networks cross international boundaries. Exchanging favors and establishing beachheads with partners and service-providers around the globe, they might best be considered transnational kleptocratic networks.

Populations from Afghanistan to Brazil, Iraq to South Korea have lashed out in recent years at this self-interested structuring of their economies and politics in a variety of ways. Many, in Brazil and Egypt, for example, Malaysia and Tunisia, have risen up in protest, sometimes toppling their political leaders. Others have joined extremist movements or criminal gangs, as in Afghanistan, Iraq, Mexico, and Nigeria. Elsewhere, people have voted for fringe political parties or champions, who promise fundamental—even radical—change. The most spectacular version of the latter may have been the 2016 U.S. presidential election, which took place as some 60 percent of the Americans polled reported fearing corrupt politicians more than any other threat, according to an annual survey,4 and both the unexpectedly popular Democratic Party candidate Bernie Sanders, and the victor, Donald Trump, made corruption central to their electoral campaigns.

Embedded in these extreme reactions to the scourge of corruption is an indictment: despite the efforts of thousands of people worldwide, in government oversight bodies, corporate compliance offices, nonprofit organizations, and development agencies, the mainstream response to corruption has not come close to meeting popular demand for a solution. Sometimes this failure has been due to the kleptocrats’ ability to co-opt or disable independent authorities. The pursuit of monetary returns above other considerations on the part of many, or else willful blindness, or competing incentives or inattention, have led to policies that reinforce and facilitate these networks and their practices at home and abroad. Civil society organizations often seek ways of working “with” the corrupt government and businesses they wish to reform, with uneven results.

But at least part of the failure may be attributed to an honest misunderstanding of the way corruption operates.

Not, of course, that studies of power dynamics in developing countries have never been undertaken. On the contrary, the field of political economy analysis burgeoned in the early 2000s, with many aid agencies and international lending institutions conducting country studies.5 But those efforts often focused on formal institutions and informal practices, not de facto structures, and largely discounted corruption as a general and inevitable feature. And within a few years, as development experts Thomas Carothers and Diane de Gramont chart in Development Aid Confronts Politics, the studies’ utility came into question—due to the “sensitivity and resistance” of host-country governments and the difficulty of translating often academic insights into concrete development approaches.6 The result was a shift to more sector- or project-specific analysis.7

But that shift means that the true dimensions and architecture of the problem go unnoticed. The sophistication, resilience, and adaptability of kleptocratic networks have escaped an equally cold-blooded understanding of their structures, modes of operation, and true scale. Too often, Western government officials still seem almost frightened to conduct such overarching analysis at all, concerned that even to try to inform themselves would be, once again, “too sensitive.”8 The work of investigative journalists or civil society organizations is usually tightly focused on the details of specific cases. A picture of the network as a whole fails to emerge, making strategic approaches difficult to develop.

Given the importance of corruption, its contribution to upheavals, violent conflict, and environmental damage worldwide, such disregard of its modalities is dangerous. It is time to return to bigger picture analysis.

This study seeks to do so by applying a framework for mapping kleptocratic networks and their practices to the case of Honduras, and by providing a reasonably legible depiction of that country’s integrated kleptocratic system. The framework and graphic template can be used to guide the study of any state or region,9 with a resulting picture that will differ depending on such factors as geography and natural environment, political history, economic fundamentals, and diplomatic context.

The principle is to examine in turn the public, private, and criminal sectors, as well as outside people and institutions that are interacting with the political economy of a given country, for signs that they are colluding in the illegitimate capture of wealth on behalf of network members—that they are, in effect, looting the commons.

In the case of the public sector, the inquiry must determine whether elements of state function have been tooled to serve the purpose of wealth-maximization, while government agencies that represent potential obstacles to it have been expressly disabled. For the private sector, the question is not just whether the structure of the economy is skewed toward the capture of rents by a limited number of people. The analysis must also find out whether these individuals exploit inordinately privileged state protection or relationships with members of government to secure those rents. In examining the criminal sector, similarly, it is potential personnel-sharing as well as active, system-wide government protection in return for a portion of the revenue stream generated by illicit activities that are of interest.

To draw the conclusion that a given government is functioning as an integrated kleptocratic network, it is necessary to see a pattern across many institutions and industries. Just as human rights reporters must demonstrate a repeated and consistent series of actions in order to dub their aggregate a “gross violation” and not just random acts of violence, so must this analysis make a distinction between merely opportunistic acts of corruption and the species of deliberate design that leaves distinctively consonant traces.

The novelty of this framing is its focus on the interpenetration of the three sectors. A ranking government official may have a brother who provides legal services to a drug cartel, or be married to the CEO of a company that depends on public contracts or permits. Individuals may cycle in and out of business and government. This flexible interweaving of the strands of kleptocratic networks is what makes them so resilient. So it is worth exploring the different ways that interpenetration is manifested. Are individuals wearing two hats, for example, playing a role in the public and the private sectors simultaneously and thus serving as a node linking the networks? Are key leaders in one sector represented in others by a nephew or a confidante? Or does an exchange of favors constitute the main form of interaction between one sector and another?

In Honduras, examples of all three categories of intersection are abundant.

These deep, real-world ties binding the sectors beneath the surface of ostensibly separate formal designations make the job of well-meaning, outside interlocutors difficult. Partners—in either foreign governments or business—tend to accept stated distinctions between public, private, and criminal sectors at face value, and treat each as though it were qualitatively different from the others. Some outsiders, taking the apolitical nature of their actions for granted, may be unaware of ways that their investments or support may reward this mode of operation. Other interlocutors may not care if they are facilitating kleptocratic capture of the local economy. In yet other cases, services are rendered to the network with eyes wide open. This analysis examines such supportive external actors. A distinction is made between enablers whose cooperation may be unwitting or well-intentioned, and service-providers better thought of as network employees. The geopolitical context or other conditions that favor permissiveness toward the Honduran government are also considered.

Like the webs of some species of spiders, the picture of such a complex and dynamic system can seem hopelessly chaotic—especially given the rivalries that periodically disrupt the configuration. Within the political-economic elite, such competition may play out in divergent party allegiances and political partisanship. Rivalries among those whose primary occupation is criminal can get more violent, and may draw selective enforcement campaigns in their wake. This project’s research and design team has developed an infographic that visually alludes to this complexity, while simplifying it to the point of legibility. The long illustrative text in this report, divided up by the four sectors outlined above (public sector, private sector, criminal sector, and enablers, followed by a brief treatment of the places where the captured money tends to flow) will inevitably be more cumbersome, and may occasionally seem repetitive as it revisits some of the same strands as they weave back and forth from one sector to another. It also includes at least a glance at potential countervailing forces.

The research required to build up such a picture is quite literally infinite, since conditions are continually changing. The best way to construct one of these analyses would be to do so as an open-ended project, with ongoing contributions from teams that include trained investigators experienced in financial investigation, corporate due diligence, and network analysis. It would make sense for foreign ministries and businesses or philanthropies with long-standing interests in specific countries to invest in such open-ended analyses.

Short of a commitment of that order, this report reflects a necessary degree of selectivity. Some of it is keyed to specific impacts of network operations. In particular, our research was sensitive to ways this type of political economy threatens the environment. That emphasis was deliberate, given the significant long-term security threat represented by environmental degradation. The team gave a light touch, by contrast, to some perhaps better known aspects of the Honduran context. The relatively shallow examination of the structure of Honduran security forces—and of U.S. assistance to them—will disappoint some readers.

This study also underemphasizes the truly transnational nature of these kleptocratic networks, whose tendrils wind through similar structures in neighboring Colombia and El Salvador, Guatemala, Mexico, Panama, and the United States, extractive industry interests in Canada, and Washington lobbyists, among others. The global nature of kleptocratic networks like Honduras’s urgently needs further work.

We had to make more prosaic compromises as well—striking a balance between clarity and detail, between dynamic, multidimensional realities and static, two-dimensional depictions, and between suspicions and documented proof.

Nevertheless, what follows provides a relatively in-depth effort to analyze systematically a problem that is certainly systemic. And it casts light on some of the most preoccupying repercussions for Honduras and its region.

Known for the drug trafficking and gang violence that turned whole neighborhoods into no-go zones, for example, where drivers had to roll down their windows and submit to interrogation by local lookouts before entering, and houses were mysteriously emptied of occupants overnight, Honduras has lost tens of thousands of young people in recent years, “disappeared” or driven onto the perilous routes north.10

The violence and intimidation they have fled are largely chalked up to the behavior of criminal organizations alone. Corrupt government officials, such as police or border personnel, are usually cast in supporting roles—as individuals who looked the other way in exchange for a bribe.11 Or their venal behavior is counted among the obstacles to combating crime, but not as a dimension of the criminal activity itself.

In reality, as our findings make clear, the reinforcing relationships between public officials up to the highest level, business elites, and criminal organizations are much more organic and intrinsic than that framing suggests. In some cases, gangs serve as police auxiliaries. In others, gang membership can be understood as a reaction to the systematized corruption—an effort to build an autonomous social space. While Hondurans point to evidence of progress in curbing drug trafficking, most interviewees for this report agree it was achieved only reluctantly, under U.S. pressure. Urban violence and out-migration, in other words, are by-products of the corruption of the very government that enjoys U.S. (and European Union) support to combat those ills.

The reinforcement of corrupt operating principles in the past decade has also led to a concerted assault on Honduras’s remarkable landscape. From a state of emergency to combat the mountain pine beetle, which has loosened the controls on logging and contributed to the expansion of inefficient biomass power generators, to the dozens of concessions for mines and hydroelectric dams awarded since the 2009 military coup, to drug-traffickers’ penchant for laundering money by clearing rainforest for cattle ranches, a blitz is under way to convert nature into cash. Local campaigners like Cáceres, who have protested these developments, often inspired by a profoundly different attitude toward the relationship between human beings and the world around them, have been subjected to an onslaught that has made Honduras the most dangerous country in the world for environmental activists.12

One of the most striking developments revealed in this research is how the kleptocratic network has cynically exploited international climate concerns to corner a sweetheart market for solar energy production and revive large-scale hydroelectric installations—after their destructiveness to the environment and local communities led to a reduction in new dam construction worldwide in recent decades. In this way, though Honduras is not endowed with hydrocarbons, it is suffering its own version of the resource curse.13 Arrayed against this nefarious variety of carbon neutral development, often vulnerable indigenous communities and their allies are drawing inspiration from strands of traditional beliefs and practices to weave a new vision for the future.

6 Thomas Carothers and Diane de Gramont, Development Aid Confronts Politics: The Almost Revolution (Washington, DC: Carnegie Endowment for International Peace, 2013), 148–49.

7 Ibid., 164. “Mainstream aid organizations are both expanding and rethinking their use of political economy analysis. The thrust of this move is toward more focused studies, moving from the country level to sector-level or problem-focused approaches.”

8 During briefings on this methodology, the sentiment was expressed, in these terms, by government officials in Germany, Sweden, and the United States, among other countries.

9 This was first tested on Azerbaijan, Kyrgyzstan, and Moldova in June 2016. See Chayes, “Structure of Corruption.”